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The Nation's Pulse
The Search for Crisis Leadership
The longer it goes on, the deeper the recession and the less likely any real recovery.
There is no issue in America now but the economy. Crisis provides clarity and nothing demonstrates the economy’s centrality to our country and its psychology like this lengthening downturn. While America may not be in the Depression, it is in a depression. It is equally clear that there is still a search for leadership. In that search for leadership, time has become a factor, if we are to avoid repercussions rippling beyond the economy.
Since the recession began in 2007’s fourth quarter to January 1, 2009, the Dow Jones Industrial Average had dropped over 33% — from 13,372 to 8,776. In just over two months, it has fallen another 25% (ending March 6, at 6,627). Unemployment has reached 8.1% and GDP has fallen two consecutive quarters — shrinking 6.2% most recently.
Recent polls show how deeply these numbers resonate. In a late February CNN poll, 70% of Americans responding on issues’ importance said the economy was “extremely” important — 19 percentage points above terrorism, the next highest issue. Only 19% of respondents said improvement would come this year and 62% expected improvement to take longer than one year. Finally, in an even more recent NBC/Wall Street Journal poll, 70% of respondents stated they were “very dissatisfied” with the economy — ten times more than the 7% who were “very” or “somewhat satisfied” with it.
It is not surprising that economic crisis should be able so quickly and completely to separate itself from other issues. Economic crises are universal — affecting every region of the country and aspect of life.
As stock indices and polls indicate, America has yet to find the leadership it seeks for this crisis. And in crisis, leadership is crucial. Nobel economist Milton Friedman wrote regarding the Depression: “the detailed story of every banking crisis in our history shows how much depends on the presence of one or more outstanding individuals willing to assume responsibility and leadership.”
Leadership may have been easier in the Depression. The crisis was certainly worse then, but the precedents fewer and expectations lower. Today’s presumptive leaders are hemmed in on every side by precedent and heightened expectations — the former they seemingly cannot break, the latter they apparently cannot meet.
With each passing day leadership becomes harder, the distance to get ahead of accelerating events that much greater. Time is a luxury crisis does not give. As Friedman again observes regarding the Depression: “Each failure to act made another failure more likely…[E]conomic collapse often has the character of a cumulative process. Let it go beyond a certain point, and it will tend for a time to gain strength from its own development as its effects spread and return to intensify the process of collapse.”
As the downturn continues, the hole deepens. The job of recovery is not simply delayed, it becomes more difficult. And that was already going to be harder than many now expect. Recovery will not simply return the economy to its former state. Many who once could get credit — as well as those who never should have — will find it impossible or more expensive to obtain. The economy’s trajectory will be lower — it will take longer to reach its previous heights.
The downturn’s continuance also risks non-economic costs as well. For one, it risks creating a new psychology. The Depression left many forever scarred with aversion to credit and borrowing. The same could play out today and add to it fear of investment as well. While many rightly bemoan America’s low savings rate — which has reversed during this financial crisis — the savings rate’s increase is having an economic impact.
The most serious repercussion of a continued crisis comes in a threat to America’s free market moorings. America owes more than just its prosperity to it. Our attachment to free enterprise distinguishes us as a nation as much as does the Constitution. The two are pillars, each bolstering the other. The Constitution, by creating free individuals, ensured free economic agents. Conversely, it is impossible to see the Constitution being created by other than free economic individuals. It is hard to imagine either surviving the demise of the other.
It is right that the economy’s crisis has swept aside all other issues. The stakes are high and time is short. As the Depression reminds us, it is not guaranteed that the direction America now seeks will come quickly or at all. If it does not, then it will soon become increasingly apparent that the stakes are higher than most now realize and rise well beyond just the economy.
About the Author
J.T. Young served in the Department of Treasury and the Office of Management and Budget from 2001 to 2004 and as a Congressional staff member from 1987 to 2000.
Letter to the Editor View all comments (84) | Leave a comment
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Deborah | 3.10.09 @ 6:27AM
It doesn't help when you have an administration that doesn't care about the millions of Americans invested in the stock market who are losing their life savings and retirement accounts. Obama basically says, "Let them eat cake."
He could help by doing one simple thing: cut taxes on capital gains. That would at least give investors (of all sizes) an incentive to invest in the private sector. That he doesn't do that means to me that he cares nothing about the private sector.
He's a public sector guy who believes in "spreading the wealth around." Problem with that is he's destroying the wealth, not spreading it around. He's just spreading poverty around. You can take it from there...why would he do that? Only one answer that I can see.
Deborah | 3.10.09 @ 6:39AM
He could address the banking crisis. That he and Geithner are dithering on that is an abomination.
He could cut corporate taxes to be more in line with the rest of the world.
That he does neither of those things makes one wonder...why? Ideology trumps what's good for the country. His power (and the power of the Democrat Party are more important) Scary thought, but I can come up with nothing else, especially after seeing all the $$$ in the "stimulus" bill that goes directly into the pockets of ACORN and many other lib causes.
They're socializing this country with our taxes. Thanks a bunch, Mr. President.
Rocco| 3.10.09 @ 7:02AM
Deborah, your concerns are right on the money, so to speak, but your desire to see this administration "help" is sadly nothing more than wishful thinking. This is what we get when we put the children in charge of the candy store. Obama is an arrogant, thin-skinned prig who brooks no opposition to his enlightened policies and superior wisdom; to use a popular expression, "it's all about him," and the country be damned. It would be nice to hear something from the Republicans, but they're nothing but a bunch of nervous poodles who roll over and piss themselves silly if the self-proclaimed messiah looks at them crosseyed. What a target rich environment for an opposition with a pair of cojones!!!!
Aaron| 3.10.09 @ 7:02AM
Any leader that steps forward that is in opposition will quickly be labeled as obstructionist. What we don’t need is a run of the mill passionate political leader. He or she will have to be a bold, half crazed and downright ordinary blue collar type American that can whip the ranks into a frenzy and calm them into reason. Have we ever really had a conservative leader like that before?
Deborah | 3.10.09 @ 7:30AM
Yes, Rocco, I'm in total agreement with you. I just thought I'd put a few suggestions out there (that I'm sure Obama and friends have heard before), just to let them know that we're wise to their crap.
You can fool all of the people... etc. More are wising up, just not fast enough.
Rocco| 3.10.09 @ 7:33AM
Aaron, that is precisely the problem. Anyone in opposition is AFRAID, of being labled a racist, obstructionist, etc. i.e. of being called a name. Who ever might be an opposition leader has to turn all that on its head, and not be concerned with the bullshit namecalling; it's childish, and someone needs to say so, loudly. In other words, all the terms of the debate must change. Chesty Puller (known to anyone who spent a day in the Marine Corps), and before him, Stonewall Jackson, always said, never take counsel of your fears. Fear appears to be uppermost in most everyone's mind. It's getting close to keeping your guns near and your powder dry.....
Aaron| 3.10.09 @ 8:32AM
Rocco, you may be on to something, Chesty Puller would fill the need, of course when would he not? I may offend a Marine or two, but if I’m allowed to hijack just one hero from your branch for mine… I’ll stake the claim. Back on topic though, your right that fear is the right word. Our lack of leadership is fear driven and has been for years. Fear of the media, of the voter, of colleagues, image, career aspirations, of being wrong or of even being right when right isn’t cool.
Think First| 3.10.09 @ 8:51AM
The opportunity is ripe for someone to step up. That much is certain. The fact a few have tried but failed is proof they have baggage of their own that limits their impact. They've already had their best shot at Sarah Palin and you would think if she was serious about making a bid in '12, she'd be jumping on this in a big way.
In a way I think a lot of people have DITH syndrome. "Deer In The Headlights" They just can't believe how bad it really is and the gall the Libs are demonstrating. In reality they are showing their complete contempt for the people in this country by doing all the things you would expect a Muslim president to do with an axe to grind.
Then label it all as Bush's fault and you keep your base happy and afraid to grumble too loudly because they might be the next one on the chopping block.
Redirect blame on "obstructionists" who keep the mood sour, stir up trouble and they keep asking those pesky questions no one has an answer on the teleprompter for.
With talk radio on the priority hit list, is there any doubt all dissension they gladly engage in is exactly what they fear the most?
We need a leader to step up but considering they have not so far, the hope is grim. Steele is playing at being a leader but obviously courting MSM and Washington good feelings at the same time. The ones who are staying on message are not the ones most Americans voted for the last election and are fringe players at best like Huckabee. Romney is trying to play the tune of Conservative but his record is a huge blot against belief or trust in anything he says. His capitulation to McCain is nothing to write home about either.
Who do you think will rise to come? At the moment, no one is taking a clear enough stand and making it stick. Some are making noises, like Pence and Boehner, but have rolled over too many times in Congress to be trusted to far.
Who will take the challenge and PROVE IT?
Big J| 3.10.09 @ 9:31AM
You are all correct. We need a powerful leader, but who? I say "US" (or "WE" if that is grammatically correct). Look around the internet. Check out the Tea Parties, the BLOGS, the letters to the editors. If you have just a smidgeon of common sense, you can see what is happening. This is the largest and most blatant power grab and expansion of government in our history. I for one, am not going to stand for it. I will not take it lying down, either. My letters to Congress and the White House have gotten more forceful, many lines being capitalized and ended with exclamation points. If they refuse to do the bidding of the American people, they have tragically underestimated our spirit. Charlie Rangel, Chris Dodd, Bwaney Fwank, and the rest of you liars and cheats, consider this your notice: Remember the founding of this country, the circumstances that created it, and the outcome of the Revolution. It would behove you all (in Washington) to pay a little more attention to your history. If you do not, it is sure to repeat itself.
This is not a threat, but a promise.
“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.” — Thomas Jefferson
"If there must be trouble, let it be in my day, that my child may have peace" - Thomas Paine
I have no children, but both of these statements reflect my feelings to a "T".
Son Of Sam | 3.10.09 @ 9:38AM
Leaders will emerge when we stop wishing for them and start ACTING on our own initiative, without waiting for a knight on a horse to come charging in to the rescue.
Btw, people such as myself plainly don't give a frog's fat ass what any hate America traitor has to say about us. We wear their scorn as a badge of honor.
until freedom dawns
Son Of Sam
http://www.geocities.com/samadamssos/
PS I've been posting streaming audio for awhile now, and it costs precisely ZERO to do so. Check out my site and send me an email if you're interested in getting yourselves or anyone else you know trained in doing it like this. The more voices we have, the harder it will be for the ObamaNazis to stifle us.
This is not meant as a disrespect to anyone already doing it, esp. if you're doing it better than I am
Rocco| 3.10.09 @ 9:56AM
Aaron, do so with my blessing. I had served in enough Joint billets to have a healthy appreciation for the contributions of other services. Anyone who has served is a brother in arms.
You are right on the money here.
Semper Fi!
Rick Josey | 3.10.09 @ 9:58AM
The Obama administration is more concerned about establishing their socialist agenda than fixing the economy. They are determined not to let this crisis "go to waste." Obama is creating an "urgency" for his programs, many of which have no bearing whatsoever on the country's financial stability.
Speaker Pelosi is still blowing our money right and left. Not only in the fake "stimulus" bills, but in her private time. It's infuriating to think how hard Americans work for their nickels and dimes, only to have Pelosi blow it out the exhaust of her private jet. Fat-cat "leaders" living high on the hog on taxpayer dollars.
Senator Shumer says "The public doesn't mind a little pork." He and his tax-cheating, money-wasting comrades are going to find out whether or not the public minds.
www.PatriotHangout.com
Rocco| 3.10.09 @ 9:58AM
Son of Sam:
Like you, I wear their scorn as a badge of honor - I have been for nearly 40 years, since I used to fight (maybe not the right word, since these cowards always ran away!) them in college at their gatherings.... A fist or a two-by-four in the face worked wonders for these big mouths. At my age, after 30 years in the Marine Corps, I am ready for round two.....
I will check out your site later.
Be safe,
Anthony| 3.10.09 @ 9:59AM
I confess, all through the last campaign, I harbored thoughts that what this country needed was a good economic depression to bring people back to their common sense values and sensibilities. Our self absorbed culture was, and is, out of control. Well, each day under Obama seems to bring this closer to reality, although I really don't wish this upon most Americans. I do however, confess to a small degree of schadenfreude as my liberal friends and relatives wring their hands as their accumulated savings disipate like the dew on an August morning, although there's nothing poetic about watching this carnage.
My point is, Obama is the disaster we conservatives knew he was and it has taken only 40+ days for our leftist friends to experience strange thoughts of similar discomfort. Their moment of truth has finally arrived. True, Obama and his faithful henchmen ,both in the government and the MSM, will attempt to destroy all who make this realization more wide spread, but as Obama parties into the night, and his henchmen push Marxism down our throats, his faithful are quickly losing the faith. If Obama continues policies that will wreak havoc upon the private sector, and the DOW plunges to 5,000, watch a backlash the likes no society has witnessed for some time. AGW and all the other favorite carnards of the pampered left will be shucked like corn. Pretty soon we might actually witness the bizarre sight of the comfortable left standing in unison with us screaming "We're all conservatives now"!! Wouldn't that be a sight to behold!!! Now, if only a few Republicans with guts would help lead the stampede.
stmichrick| 3.10.09 @ 10:38AM
Obama's redistributionist posture precludes leadership on a return to prosperity.
We will experience a mild natural recovery as folks venture out to consume what they need and have put off. Obama will take full credit.
Among other things, we need tax cuts/stability for the 'rich' (investors). We won't be seeing that any time soon.
Alan Brooks| 3.10.09 @ 11:53AM
people are hurting and Holder says we are cowards for not slobbering in smarm.
Bob| 3.10.09 @ 11:59AM
Hello reactionary dimwits! The market so far today is up 260 points. The current bank plan which follows TALF is being widely hailed by the market. Pandit today has spoken about the health of Citi and bank stocks are up in the 20% range. The loan spread with banks is as wide as it has been in a long time. The housing market, while down, has now reached pricing levels consistent with historical trends. Mark to market has caused derivatives and other securitizations to probably be undervalued. The hedge funds are beginning to buy in large quantities. We still need to see large retirement funds like Vanguard and Fidelity enter the equity markets for a broad market recovery. I have been consistent in saying we'll start to see a slow recovery by the end of this year consistent with the views of many economists. The savings rate has risen to about 5% now which means that people may now have enough of a cushion to start consumption again.
The signs are good and it looks like the Obama people have finally found a private/public plan that at least the market likes. Regulation will be the next step.
I still don't like the stimulus plan, but if the market comes back and business improves, the administration may well hit its GDP targets.
It is still too early to understand if true market capitulation has occurred, but the underlying fundamentals of restructuring look decent. Jobs will be a lagging factor in a recovery so I don't see any real improvement until next year for that factor.
Bob| 3.10.09 @ 12:22PM
Let me continue with the political side of today's market rally and underlying fundamentals. Republicans have made a huge mistake in being the party of "no". If the market and jobs begin to stabilize by the end of this year, Republicans will continue to be the party that doesn't understand economics. Any party that doesn't recognize that tax cuts have hurt more than helped will continue to lose for the foreseeable future.
Isn't it time to return intelligence and intellect to the Republican party instead of promoting people who believe but lack reason?
stmichrick| 3.10.09 @ 12:46PM
Bob;
NO
You're out on a limb here. The market will tank again.
What private/public plan that the market likes?
Trackback| 3.10.09 @ 1:17PM
The American Spectator : The Search for Crisis Leadership, on PunditKix, links to this page. Here’s an excerpt:
Roger McKinney| 3.10.09 @ 1:29PM
Friedman was simply wrong when he wrote "E]conomic collapse often has the character of a cumulative process. Let it go beyond a certain point, and it will tend for a time to gain strength from its own development as its effects spread and return to intensify the process of collapse."
Many other Nobel prize-winning economists would disagree with him, especially Hayek. The truth is that the US and Europe endured dozens of similar crises in the century before the Great Depression. In none of those crises did anyone take leadership to stop it and the economy always recovered quickly. In fact, the Great Depression was the first depression in history to run so deep and for so long, and it was also the first depression in which the state tried to rescue us.
The courage needed today is the courage to stand against the mobs, journalists and politicians and scream "Don't do something! Just stand there!"
Bob| 3.10.09 @ 1:37PM
Stmichrick, the market has dropped about 56% from its high. Once a market restructures to that level, it is highly unlikely it will fall much farther by historical standards. Market capitulation occurs when a market tries to find a bottom. Typically, at this phase, you'll see ups and downs. I expect these ups and downs to continue within a range for a while. That's why it is only March and I don't expect to see any major recovery until the end of the year. Housing inventories are nearing 15 months or so so this recovery will be rather slow over the next few years. However, the fundamentals are stronger than we've seen in quite a while.
So what is the underlying fundamentals analysis on which you are basing your opinion?
This morning, Bair talked about how the current mortgage plan is being implemented. It is similar to TALF.
You'll notice that there are few on this board who understand market fundamentals which is why you continue to see this tripe. In addition, Frank is talking about reinstating the uptick rule as well as revising mark to market rules.
This is good stuff and is neither Republican nor Democrat.
Bob| 3.10.09 @ 1:43PM
Roger, you do realize you are arguing against tax cuts as well as spending, don't you? Both sides are acting like Chicken Little.
As I've consistently stated, neither tax cuts nor spending have proven to be tremendously stimulative. That said, things like the TALF and changes in market regulation as well as preventing the collapse of financial markets are probably helpful.
stmichrick| 3.10.09 @ 1:51PM
Bob;
Doesn't it bother you that 'the market restructuring to' this level means that a lot of people are out a lot of savings, for as you say, probably the next few years? All so we can have, as Biden says, a recovery based on 'decency' (read: redistributionist policy).
We've seen in the past 20 years the kind of policy that make the stock market, GDP and job creation show sustained growth. And ,as I've heard you say, how uncontrolled spending in the process undermine it.
Analyze that.
Bob| 3.10.09 @ 2:34PM
stmichrick, when you have any bubble, the wealth that was created was not "real". The savings rate went below zero, people were using their houses for a bank, and the only people that "won" were the ones promoting financial trades. Housing prices are now following historical growth trends. If you take a longer term look at GDP, you'll see a steady increase many years prior to Reagan.
http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230
So that has nothing to do with policy. The stock market has had many ups and downs in the past 20 years and did not show consistent growth:
http://moneycentral.msn.com/investor/charts/chartdl.aspx?Symbol=$indu&CP=0&PT=11
In fact, if you take out the dotcom and housing bubbles, you get consistent growth before and after Reagan. With regard to job creation, if you go to BLS and create a chart of total employment from 1960 to current, you'll see that there was no increase in the rate of growth of employment before and after Reagan.
You point out the problem with the myths of this site. If you look at actual data, you find that Reagonomics is a myth. You are getting a political take on the economy, not an objective one.
You can use this BLS servlet to build that chart:
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
Remember to change the date range and move to total non-farm payroll.
OK... analyzed...
stmichrick -- do some of the homework yourself rather than believing the pundits or Limbaugh lemmings. That way you'll see the truth without spin.
Roger McKinney| 3.10.09 @ 2:46PM
Bob, Yes I realize I'm arguing againt tax cuts, too. I'm also arguing against "things like the TALF and changes in market regulation as well as preventing the collapse of financial markets." They are not helpful. They create huge levels of uncertainty. Investors are sitting on the side lines waiting for the Feds to decide to quit destroying the economy before they get in. The only way the state can help the economy to grow is get out of the way. That means rolling back regulation, not adding more layers. The state has tied the economy with regulation like a cowboy ties a calf at a rodeo, then everyone wonders why the calf can't get up.
Anthony| 3.10.09 @ 3:07PM
What a load of B.S. we get from market guru Bob. Hey Bob, stuff your traditional market analysis where the sun doesn't shine. This market isn't looking for its bottom, something you obviously haven't misplaced , instead, this market is in free fall because no rational investor knows what sectors to invest in because Obama has declared war on capitalism, free markets and business in general. Shall we invest in energy? Nope, only green energy, so says Pelosi, Reid & Obama. Shall we invest in banks? Hell no, Barney Frank and Chris Dodd own them. How about the auto industry? Stupid question. Other than government and gun manufacturers, what sectors are likely to boom under Obama Bob? Please tell us, Mr. Market Fundamental Sage, what sectors are you investing in?
JP| 3.10.09 @ 4:31PM
Bob,
We shall see if massive defecit spending (TARP+Stimulus+FY2010 defecit of $1.6 trillion+TARP 2 (the orginal TARP money has been spent on non-TARP items. In order to buy off future toxic assets, the Treas will have to borrow money)+FDIC bailout ($500 billion)+ a possible credit card bailout) will actually create any wealth. The federal goverment will have to either a)raises taxes at some time b)continue printing more money and/or c)continue to auction off Treasury Notes. If the President choses a) private wealth will be redistributed (Congress rarely has shown the procolivity to actually pay off debts. This doesn't create new wealth. If he choses b) any wealth creation will surely be lost due to currency inflation. If he choses c)our nation will again see inflation as our national debt will surely soar. Besides, there is no guarentee foreigners will continue to buy our treasury notes.
Since inaugeration, the President has pushed a massive stimulus bill; offered a new budget worth a net defecit of $1.6 trillion; pused for a $684 billion carbon tax, and has done absolutely nothing to show that he is remotelt interested in solving the banking crisis. Granted Sec Paulson reneged on his promise to use the first TARP installment to buy-off toxic assets. Yet, Geinter has done the same thing. Not a nickle of TARP money has gone to its orginal purpose. GM and Chrysler have gotten $70 billion of it and still demand another $38 billion to meet end cost demands. Both continue to lose money with every car they sell.
In my opinion, today's rally was both good and bad news. CITI did enjoy a quaterly profit -mainly due to fees it collected in the mortgage refi scramble going on. But that is due mainly to the Fed Chief keeping interest rates at 0%. Millions of qualified homeowners are taking advantage of this narrow window of oppurtunity. I say narrow because, the current Fed Chief is playing with fire. Zero interest rates coupled with all the injected liquidity (over $3 trillion) pumped into our economy will surely have inflationay pressures. Couple that with the $800 billion of stimulus money that will be spent the next 36 months and you have a poweder keg. The nearly $5 trillion of borrowed money that will end up either being spent or borrowed is a net negative as none of it was generated by work, but by redistribution. That is, it will not in the long run generate the kind of market numbers people are used to. If the President does raise taxes and allow the Bush tax cuts to expire, investors will flock to safe havens (ie cash, foreign currencies, precious metals, commodities). We are heading for a brick wall. I don't think any of us want to lose our jobs, homes, or watch 90% of our retirements go up in smoke. But that is exactly what is and what will continue to happen. BTW, Obama is set to borrow in his first 6 months what Bush did in 8 years. It didn't work for Bush, and it surely wont work for our current President.
Bob| 3.10.09 @ 5:03PM
Roger, I was in the financial services industry and can tell you that it isn't the amount of regulation, it offering the RIGHT regulation in terms of leverage, risk retention, capital requirements, responsibilities, etc., so the market can behave properly. I'm against regulation that tries to manipulate the market like tax incentives, pushing mortgages, subsidies, etc. That's why I prefer a flat tax without deductions to limit political influence.
Anthony, if you think that Obama has a war on capitalism then you certainly have consumed too much of Limbaugh KoolAid and are one of the Limbaugh lemmings. The greatest assault on capitalism is the unregulated markets that caused the current financial crisis. Capitalism works in a democracy when the markets are fair. But then again, since you don't understand market fundamentals, how could I expect you to understand capitalism?
JP, I agree with much of what you have said. However, from a fundamentals standpoint, I do believe we are seeing some market capitulation. It was a broad rally today not only the financials. If it continues this week or just stays at the current level without significant profit taking it will be a good sign.
That said, I am concerned, like you, about the level of debt. As you know, I have railed against both Reagan and Bush for growing the debt and feel the same way about Obama. Furthermore, as you have seen, I was against the bailouts and would have let the auto companies file for bankruptcy. The increase in the national debt is immoral in my perspective. That's why I believe in a balanced budget and reducing spending BEFORE we give tax cuts. We must pay for what we spend.
The market will return as there is a lot of capital on the sidelines and a great number of undervalued stocks.
Philosopher | 3.10.09 @ 5:11PM
To 'Bob' above-
I don't think you get what the economic fundamentals are is you promote this spending spree and think that tax cuts won't work:
1. Private citizens make up the economy, not false govt 'businesses' or govt actors.
2. Obama and the Democrats keep changing the rules. Captial and investors will continue to flee the market every time it is threatened or acted against.
3. Every dollar of govt taxes equals a dollar of growth removed from the economy.
4. History shows time and again that cutting taxes, especially on businesses, unleashes growth. Just look at Ireland in the econ-anemic EU.
Take a couple of minutes with Milton Friedman and re-acquaint yourself with free enterprise: http://pracphilosblog.wordpress.com/2009/03/05/a-2-minute-primer-on-free-enterprise/
Roger McKinney| 3.10.09 @ 5:13PM
Bob, I appreciate that you have experience in the industry, but I have heard that line about getting the right regulation for decades. Somehow, we never seem to get it right. Everyone thinks that one more layer of regulation will do the trick. Remember SOX? We have been trying to get the regulation right since the creation of the Fed in 1912. After nearly a century, you would think people would begin to lose faith in the power of regulation, but it seems they never learn, always expecting different results from the same strategy.
Regulation of banks had nothing to do with this crisis. Leverage did. The Fed makes ridiculously high leverage possible with ridiculously low interest rates. Then it raises rates to reduce inflation and the debt pyramid crashes. That is the story of most financial crises over the past 400 years, yet we're still debating what causes them.
Roger McKinney| 3.10.09 @ 5:17PM
Everyone needs to read the short book "Manias, Panics, and Crashes: A History of Financial Crises" by Charles P. Kindleberger. At the end of the book he blaims credit expansion for the cause of most of the crises. That explanation fits well with Hayek's business cycle theory, the only business cycle theory that makes any sense.
Bob| 3.10.09 @ 5:35PM
Philosopher, you can't provide any definitive evidence that tax cuts are stimulative. Take a look at this graph on GDP and you'll see that economic growth has little to do with who is President and what the tax policy was. In fact, the greatest growth in GDP came under Clinton and tax increases.
http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230
Furthermore, the only large effect of tax cuts have been substantial increases in debt:
http://zfacts.com/p/318.html
So please, don't just use talking points -- do the homework yourself. It is private enterprise that is the foundation of economic growth, not government.
As for Ireland's Celtic Tiger, I suggest you do more research. Economist David McWilliams has analysed it thus:
"The case is clear: an economically challenged government, perniciously influenced by the interests of the housing lobby, blew it. The entire Irish episode will be studied internationally in years to come as an example of how not to do things."
Google "Celtic Tiger" and read for yourself.
Roger, it wasn't leverage that caused the problem, it just accelerated it. Securitization with no risk retention caused the problem as mortgage originators would sell to anyone as long as they didn't have to keep the risk. Securitization was started in the 80's. Starting in 2001 or so, CDO's were bundled into derivatives that could not easily be valued. Investment houses were not regulated so they could leverage these instruments to 30 times. AIG and others provided swaps to the investment houses would get rid of their risk. So please don't simplify the problem as one of leverage -- that only added fuel to the fire.
Alan Brooks| 3.10.09 @ 5:43PM
okay, Bob, a political question-- why did Holder pick this season to say we're cowards for not sucking up to people who aren't millionaires like him?
stewpified| 3.10.09 @ 5:43PM
Hey Bob, tax cuts ultimately increase tax receipts-so if they're not stimulative, what are they? What do you mean by "markets are fair?" There is no true "fair." If you're for the Obama redistributive fair, it means we're all less wealthy--not an acceptable outcome in my eyes. This boob is using "stimulative spending" as a feint for his power grab. I disagree with you on regulation. For the regulators in this case are the pols who are good at one thing only--getting elected and staying there. If you think any of these azzholes in D.C. have the capacity to make decisions better than the market (i.e. the aggregate opinion of we the people expressed in dollars) you are the one drinking kool aid. And I understand why you reference your experience in the financial markets in the past tense. Rally today is based on the potential that we ditch the mark-to-market rules--part of the ridiculous regulation (in the name of "fairness") the transparency theorists thought was a good idea. We're oversold enough that we needed a reason for a bounce--a chance for folks to lighten up if they mis-judged their appetite for risk in equities. I agree with Anthony. BO's policies won't help, but I don't want this pig to get any worse than it is just to get the idiots out of office. If there's a recovery, it'll happen in spite of BO; not because of his policies.
Anthony| 3.10.09 @ 5:45PM
So genius Bob tells us that Obama is really the savior of free markets and capitalism after all, wow, that's some good s*** you're smoking Bob. You talk about "unregulated markets", while it's true that greed has had its day on Wall St, you seem to ignore how government hacks have "over regulated" the markets, such that banks were required to bundle sub-prime loans in order to stay in business. TARP has put congress in charge of the auto industry. So who is really creating these "unfair" markets? And Bob, you still haven't told us, the great unwashed ignorant of market fundamentals, what sector (s) of the Obama recovery to invest in.
Alan Brooks| 3.10.09 @ 6:01PM
I shy away from economics because every economist gives an answer contrary to the previous one queried: economics becomes more confusing as the years go by and I understand less now than in 1987.
but here's another Holder question: isn't it self-preservatory rather than cowardly to avoid those who want to mau mau you?
Bob| 3.10.09 @ 6:02PM
stewpified -- you cannot provide graphical evidence that tax cuts increase tax receipts. Here is a chart of federal revenues:
http://www.heritage.org/research/features/budgetchartbook/fed-rev-spend-2008-boc-R2-Federal-Government-Tax-Revenue.html
Please note that the greatest increase in federal tax receipts came with the tax increases of Clinton, not Reagan and certainly not Bush. This point has been disproven so many times but, for some reason, politicians pray on the stupidity of the conservative base to hold this thought alive.
As for redistribution, I am not for it in either direction. I believe we should have a flat tax that includes social security and medicare (since neither of them are really trusts) with no deductions and let the market decide who makes money. Payroll taxes are regressive and income taxes are progressive.
Anthony, banks were never "required" to bundle sub-prime loans. They came primarily from mortgage companies like Countrywide, Household, Beneficial, and brokers. Banks were involved with CDO's, not mortgage origination. But then again, you pull this information directly out of your covered orifice. Regarding investment sectors, I am not a trader -- my expertise is in business and economics. I can comment on the economic factors affecting the market, but trading is a whole other discipline. Buying depends on valuation, balance sheet strength, competition, and how much the categories are depressed. That's just not what I do.
Bob| 3.10.09 @ 6:04PM
Alan, regarding Holder, I am unimpressed and believe he made as dumb a statement as Rush does on a daily basis. I grew up in South Central and can tell you there is a world of difference between discrimination back then and now.
CH| 3.10.09 @ 6:08PM
It's a fool's errand to argue with Blob.
CH| 3.10.09 @ 6:15PM
Yeah, but Rush is not the AG, doofus.
Bob| 3.10.09 @ 6:47PM
CH --
"It's a fool's errand to argue with Blob"
You're right -- you don't want to argue with a fool like Rush.
"Yeah, but Rush is not the AG, doofus."
Right again, lemming breath! Rush never got a college degree.
CH| 3.10.09 @ 6:50PM
Stupid, Rush has no coercive power; Holder does. If you'd get your head out of your a$$ for just a second, you'd discern the difference.
stewpified| 3.10.09 @ 7:45PM
I don't see how the graph proves your point Bob-it states that tax revenues have increased as rates have been cut. On the micro level, wouldn't you agree that the velocity of a dollar spent in the private sector is greater than one spent in the public sector? Doesn't that make sense given competition and it's effect on making organizations more efficient (vs. the incredible waste in gov't organization-the true monopolies)?
Why did intermediaries have to bundle the loans, Bob? Because of wonderful ideas like CRA forced lenders to make loans to borrowers they otherwise wouldn't have. Who's idea was that (in the name of "fairness")? Um, socialist politicians like the numbnuts in charge now. And ragging on Rush Limbaugh is so lame. At least he has specific ideas on what's good for the economy and society. Unlike the "move forward" and "help the middle class" inane generalities that gets this crew into office--then continue once they realize they are bereft of solutions now that they're there. Once the name-calling dies down, perhaps liberals might take a look at the lack of substance in their positions vs. the specific ideas behind small government, efficiency, self-responsibility, cost-cutting that consistantly underlie the positions of the right.
Unfortunately, out current economic malise might have to continue for quite a time and degree before left-wing idealogues start to see the light.
EW of NH| 3.10.09 @ 7:56PM
Frank Schaeffer, whose own family helped create years ago the movement known as the Religious Right, now disavows the Republican Party. This is a portion of what he has to say today in an Open Letter to the Republican Party:
“You Republicans are the arsonists who burned down our national home. You combined the failed ideologies of the Religious Right, so-called free market deregulation and the Neoconservative love of war to light a fire that has consumed America. Now you have the nerve to criticize the “architect” America just hired — President Obama — to rebuild from the ashes. You do nothing constructive, just try to hinder the one person willing and able to fix the mess you created…
“How can anyone who loves our country support the Republicans now? Barry Goldwater, William F. Buckley and Ronald Reagan defined the modern conservatism that used to be what the Republican Party I belonged to was about. Today no actual conservative can be a Republican. Reagan would despise today’s wholly negative Republican Party. And can you picture the gentlemanly and always polite Ronald Reagan, endorsing a radio hate-jock slob who crudely mocked a man with Parkinson’s and who now says he wants an American president to fail?!
“With people like Limbaugh as the loudmouth image of the Republican Party — you need no enemies. But something far more serious has happened than an image problem: the Republican Party has become the party of obstruction at just the time when all Americans should be pulling together for the good of our country. Instead, Republicans are today’s fifth column sabotaging American renewal…..
“After Obama was elected, you Republican leaders had a unique last chance to send a patriotic message of unity to the world — and to all Americans. You could have backed our president’s economic recovery plan. Since we all know that half of our problem is one of lost confidence and perception, nothing would have done more to calm the markets and project resolve and confidence than if you had been big enough to take Obama’s offered hand and had work with him — even if you disagreed ideologically. You had the chance to put our country first. You utterly failed to rise to the occasion.
“The worsening economic situation is your fault and your fault alone. The Republicans created this mess through 8 years of backing the worst president in our history and now, because you put partisan ideology ahead of the good of our country, you have blown your last chance to redeem yourselves. You deserve the banishment to the political wilderness that awaits all traitors.”
Savy| 3.10.09 @ 8:26PM
So I guess EW in NH rant says.... Obama is the answer? Yes, the Obama answer to our economic problem is to: tax more, spend more, play class warfare more, lie about his earmarks, lie about his tax cheats, lie about his lobbyists, oh...and call us rascist cowards. Yes, Obama is the answer. What a guy.
Savy| 3.10.09 @ 8:29PM
Oh, and EW in NH. Take several valiums with several martinis and go stare at your teleprompter like Obomarx. Let the adults
fix the economy.
Matt| 3.10.09 @ 8:42PM
EW--Ewwwwwwwwwwwwwwwwwwwwwwwwww!! Loser. Obama is stinkin' up the Oval Office, what a putz.
Don't fret| 3.10.09 @ 8:44PM
There is loads of Ham Burgers, foot ball, monopoly money, why worry about the economy you don't have one.
America will soon become the reign of the Cock Roaches, why worry.
Don't fret| 3.10.09 @ 9:02PM
I am Daphne, the evil socialist witch who hates everybody. I am a loser with a huge rear-end and 4 missing front teeth. Gotta go, darlings, I have to strap on my bomb vest now. God Bless America!!
Patriot| 3.10.09 @ 9:03PM
You would know about cock roaches.
MT| 3.10.09 @ 9:05PM
Cock roaches are her only source of protein.
Truth to Power| 3.10.09 @ 9:11PM
"Right again, lemming breath! Rush never got a college degree."
At least he is not a perpetual sophomore. You need better camo Bob, you're slip is showing.
Michael Tomlinson| 3.10.09 @ 10:46PM
I've cashed out of the stock market after losing most of my investments since Obama was elected The greater portion after he took office. Last week after he blew off investors I lost over $1,500.00 in under 3 hours. Why wait till my investments are zero or George Millier takes them.
I never planned to actually retire, but thanks to Barack Obama I never can even if I want to.
The market that I've been in since the 80's (I rode out the Reagan collapse and Clinton's killing the Pacific Rim) is a losing proposition over the next decade. All the talk about the market recovering eventually is probably true (Obama and Democrats may make it impossible), but it want get back to the Bush levels in my lifetime the way Democrats are killing the economy (hope all the anti-Bush types enjoy the audacious change).
A little histroy of how badly Obama and Democrats can make things. FDR so screwed up the market and economy with the New Deal that it only returned to 1929 levels 10 years after one of the worst President's in history died in the arms of his mistress at Warms Springs, GA. The man who got half a million Americans killed in a war of choice (that's for all the idiots who think we didn't have to fight in Iraq) didn't save capitalism -- Captitalism Saved US!!!!!!!!
This is the change America wanted and we're getting it and more. Wait till Obama fully dismantles Bush's policies that have kept us safe and we lose in Afghanistan, because of Obama. Think things are gloomy now wait till thousands of our homegrown Muslim jihadists join hands with their brothers across the sea.
Happy Days are Here Again if you're a moron (i.e., Democrat)
Michael & Rhonda Tomlinson| 3.10.09 @ 11:06PM
EW of NH here's what we think of your posting.
You can kiss our Bush loving, religious right, military proud . . . You get the idea and quit using Ronald Reagan to spew your hate. Quote your own leaders people like Hugo Chavez, Robert Mugabe, Osama bin Laden and Barack Obama. You could throw in Mao, Castro, Stalin and FDR too.
If you haven't noticed it is Barack Obama who in less than 2 months destroyed the stock market, is killing the economy, oversaw a rise in unemployment to over 8%, producing unprecedent deficits, has so emboldened terrorists in Iraq that they murdered 33 Sunni and Shia leaders working for national reconciliation, is trying to sell out Iraq and Afghanistan to Jimmy Carter's Iran and decided protecting terrorists is important, but innocent unborn life isn't worth the effort.
When George W. Bush was President the economy regularly grew at 3-5% annually, unemployment was at historic lows, interest rates were low, inflation was low and the nation was safe. It took a Democrat Congress to start derailing Bush's successes and Obama to sign the deal destroying our economy, dismantling his pro-family and life agenda and eventually making our country the playground of blood thirsty heathens who think chopping fools heads off like yours is a religious duty.
Welcome to the Obamanation a crumbling economy, collapsing stock market, skyrocketing unemployment, censorship and undermining of American's Constitutional liberties in the name of supporting Obama and the rise of American Neo-Fascism.
If being a neo-conservatives means fighting Muslim terrorists, defending innocent life and praying for a return of sane and patriotic leadership in the country we love then we readily embrace the name. (Of course we know when the Anti-Semites from New England say "neo-conservative" they really mean "dirty Jews/Zionists. Hitler would love these guys they're so much like him full of BS and demanding we all act as slaves to their chosen "messiah.")
Michael Tomlinson| 3.10.09 @ 11:19PM
Sorry to keep posting, but I just read Bob's asinine remarks about taxes. Using Bob's logic I guess we should have a 75% flat tax. Obama and Democrats would love that it would create more poverty for them to "fix."
In the 1920's Calvin Coolidge and Andrew Mellon cut the tax rate from 75% to 25% (on the wealthy). There was unprecedented growth in the economy, unemployment was as low as 1% and government revenues grew.
The same happened when John Kennedy, Ronald Reagan and George W. Bush cut taxes. It is not only the unprecedented spending of Obama that is sucking the life out of our economy, but the promise of higher taxes. As Obama destroys the stock market and leads the nation into depression higher taxes will only make things worse. Hoover and FDR falled the Obama model and the economy did not recover from their high tax and interventionist policies until 1955. It wasn't until 1943 that the depression ended and that was no thanks to FDR and his "brain trust."
Of course the old saying holds true for people like Bob-- "Convince a fool against his will and he's of the same opinion still."
CH| 3.10.09 @ 11:44PM
What's even crazier is that Bob claims to be a 'fiscal conservative'. Go figure.
Gonzo| 3.11.09 @ 1:24AM
Why do you all talk about Reagan like he was actually cogent at any point in his office? He was bascially a retard for 75% of the office. And it was random! Did you all catch the Ollie North business where he left him (Reagan) high and dry but Reagan was too slow and retarded to actually challenege him? It might have been a great battle, but Reagan was cashed out. Sad.
Matt| 3.11.09 @ 1:40AM
Libturd, if anyone looks brain-damaged, it's your commie in the White House. Without that teleprompter stuck to his face, he'd be totally incoherent. Not very smart, just pretty.
James| 3.11.09 @ 6:26AM
Bob:
It's a one day rally, thanks to Citi. 1 day is not enough to say that the market can pull through. You know that.
You know the problem with Citi? It's not controlled 30-60% by the FED. Citi's immediate publication of its earning in 2-month period for 2009 IS SUSPICIOUS.
It's under the duress of FED. We can nolonger rely to the honesty of these major large banks which swallowed TARP. They are under the control of the FED.
THE FED? FED HAS BEEN THE MAJOR SOCIALIST RULER IN AMERICA SINCE CARTER'S LAW. We, Real Conservatives, have been failed by the two Bushes (including Newt) in re-organizing and in making the FRB smaller. Fannie and Freddie are still alive at the expense of the entire financial sector.
When Bernanke said that he wanted a major overhaul of the Fed, he is partially right. We need total overhaul. First overhaul should be the removal of Bernanke and making him accountable to the people because of incompetencies. Bernanke is a COWARD Wormtounge of Pelosi/Reid, and now Obama. Let us make our banking and financial sector free again from the Fed. We need to repeal the huge TARP II. Bush couldn't even disburse half of TARP I. But for Obama this great sum of money is just not enough.
We are making a very distorted market: a market that means if one falls, the rest of the market participants falls. Only Fed has the assurance to live because of people's tax money.
The best indicator for the market now are the European big companies. Check them out. The +380 points of Dow is followed by the extreme loss in the rest of the world market.
EXAMPLE: BLOOMBERG REPORT MAR 11
March 11 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, posted a 20.9 billion Swiss franc ($18 billion) loss for 2008, more than initially reported, and said it remains “extremely cautious” about the outlook for this year.
The full-year net loss widened by 1.19 billion francs from the figure reported on Feb. 10 because of costs to settle a U.S. tax investigation and additional writedowns on securities, the Zurich-based bank said in its annual report, published today. UBS fell as much as 3.9 percent in Swiss trading.
Bob| 3.11.09 @ 8:13AM
stewpified -- tax revenues increase whether taxes are cut or if they are raised. That's what the chart shows. Anyone who is halfway logical would then realize that marginal tax rates have little to do with federal revenues. That's the point. Business creates GDP, not government. As GDP rises, so will federal revenues. The argument that tax cuts stimulates the economy has no proof because you'd also have to prove that tax increases hurt the economy. I repeat -- this proves that GOVERNMENT is not the answer.
James, this was a one day rally. We don't know if it was a bear rally or the beginning of a bull run. That's what I said. But as someone with a business economics background, I look for the supporting market factors. They are beginning to show up. Timing the market is a fool's errand so I would never attempt to do that. But the underlying economic signs are good for market capitulation to occur. Regarding European banks, there is a lag effect as we started this problem. Furthermore, the oversight of banks in Europe is even more lax than it is here.
We've all lost money in the market. I put 80% of my portfolio in money market instruments over a year ago and have not got back in so I've probably lost less than most. I'm still hesitant to get back in right now, however until I see more signs of market capitulation. I've done well with my longer term investments, but I've done poorly with trading. I'm convinced you can't trade successfully unless you have inside information or are a large enough hedge fund to manipulate the market.
Good luck in the future.
Ran| 3.11.09 @ 9:27AM
Deborah: "He's a public sector guy who believes in "spreading the wealth around." Problem with that is he's destroying the wealth, not spreading it around. He's just spreading poverty around."
I agree totally. From an amateur's view [yours truly], free markets "spread wealth" when they create employment opportunities, and those long-term earnings find their way into creating investment incentives for new opportunities.
Command markets aren't based on real needs or earned demand - so their markets are inherently inefficient. That inefficiency must be covered - with other people's money by the use of force or, in the short term, with borrowing. It sets up two sorts of debt: Financial and psychological. Financial debt has to be monetized somewhere in the system, and it appears to me to arrive as inflation as cash is printed to pay debt and to cover deficits.
Psychological debt gets paid two ways: There is a disincentive generated within potential producers by punitive taxes. Most people have a natural willingness to pay some tax to keep the system running, ordered and to keep borders secure. Governments - especially labor socialists such as Obama/Reid/Pelosi abuse that willingness with abandon.
There's another sort of debt payment made by society on a personal basis: Families stop having babies. The burdens and false security of the nanny state create disincentives to reproduce. The effects of this are evident all over Europe and even here amongst American urban "liberals." Mark Steyn's book America Alone chronicles the progress of the cancer as it eats away at Europe.
Your point about destroying wealth and 'spreading poverty around' is accurate, and then some. Obama/Reid/Pelosi are spreading a cancer that will literally depress the culture into extinction. I don't know or even care if this is their intent.
Ran| 3.11.09 @ 9:28AM
Big J - your point [if I'm reading you correctly] is that leadership can solve the problem IF it comes from the bottom upwards. Peter Ferrara's TAS article What Conservatives Must Now Do provides a map.
Rocco, Aaron, thank you gentlemen for your service. You guys nail the X-ring. If either of you run for office, send us your links. I'm putting my money and effort into supporting local libertarians and conservatives.
Mr Young, timely article - thanks and appreciation.
Bob| 3.11.09 @ 10:28AM
Ran, free markets do not "spread wealth". However, "fair" markets and the distribution of information do spread wealth. The robber barons were a product of very free markets. The hedge fund managers are products of very free markets. AIG is a product of free markets.
That said, I will basically agree with you on "command" economies. However, all economies are mixtures of the two. The country needs an energy policy. The country needs a military policy. The country needs an infrastructure policy. These are examples of "command" markets. The trick, in my opinion, is to recognize when you must have these planned markets, and if not absolutely necessary, leave all else to a free AND FAIR marketplace that is transparent.
Transparency is a huge problem and the free marketers of the past hated transparency as they made money off of the limited distribution of information.
So the question is NOT whether we should have a free market or command economy, it is what should be free market and what should be command. For example, I don't believe the tax code should be "command" which is why I advocate a flat tax. Anytime you have marginal rates, a differential capital gains tax, and lots of deductions, it is a prime example of a command market and it should be stopped.
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Getting Hercules to Help You
Hercules won’t help you until you have all five items from Zeus’ quest.Poptropica Once you have the five items, bring them to Athena. Zeus will appear and steal them. The big jerk! Once this happens, talk to Athena and she will tell you that Hercules will help you. You’ll need to have the magic mirror from Aphrodite because Hercules doesn’t want to have to walk. He’s so lazy!
Getting the Hydra Scale
You can see how to do this in the videos, but basically you need to jump up when the Hydra is about to strike. Poptropica He will rear one of his heads back to attack and his eyes will bulge out. When this happens, jump up in the air and then try to land on top of his head. That head will get knocked out. When all five heads get knocked out, the Hydra will be asleep and you can click on him to get one of the scales. Poptropica I’ll have a full written walkthrough very soon, but in the meantime, here are some answers to some of the frequently asked questions about Mythology Island. Having trouble? Post a question in the comments and I’ll try to answer it!
Getting Hercules to Help Yo
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